EUROPEAN CALL OPTION APPLICATION IN INCOMPLETE MARKET-ANALYSIS AND DEVELOPMENT

Option is derivative instrument that have investmen t benefit and provide return for the writer and the holder. Option price determination is affected by risk fact or. However in Black-Scholes model option price is determined without arbitrage risk affection so it i s impossible to take return. In this study, option price formula is constructed to be more represent the con dition of financial market using incomplete market concept where financial asset, that is traded, is a ffected by arbitrage risk so it is possible for mar ket participants to take return. European call option i s defined by Esscher Transform method and option price formula is determined by changing its form to linea r approximation. The result from this study is opti on price formula with linear approximation has some pr ivileges. That is easy to be applied in computation process, more representatives in getting risk indic ation in the financial market and can predict optio n price more accurately. Linear approximation formula is ap plied in the program that can be used by option wri ter or holder and is equipped with export data feature that can be possible for further research developme nt.